Lloyd's Maritime and Commercial Law Quarterly
PAYMENT OVER AND CHANGE OF POSITION: LESSONS FROM AGENCY LAW
Elise Bant *
This article examines the agent’s defence of payment over and demonstrates that it contains a number of valuable insights for the change of position defence. In particular, the defence of payment over offers some important lessons on what may count as a relevant change of position, as well as the roles of notice and the defendant’s fault in the change of position defence.
A. INTRODUCTION
It was in 1966 that Goff and Jones first hypothesized that the law of agency provided an isolated example of what should be a more general defence of change of position.1
However, it was not until the seminal decision of Lipkin Gorman (a firm)
v. Karpnale Ltd
2
that the relationship between agency law and the change of position defence came under serious scrutiny by other restitution scholars.3
In that case, Lord Goff of Chieveley referred to an existing group of cases that could
arguably be said to rest upon change of position: (1) where an agent can defeat a claim to restitution on the ground that, before learning of the plaintiff’s claim, he has paid the money over to his principal or otherwise altered his position in relation to his principal on the faith of the payment… 4
Since this groundbreaking decision, restitution scholars have revealed a significant degree of confusion in the case law as to the purpose of the agency defence referred to by Lord Goff and its constituent elements. In essence, the cases support two different agency defences. The first, which was identified by Lord Goff, has two key elements:
(i) the agent must have received the benefit in his capacity as agent; and
(ii) the agent must have paid the benefit over to his principal before receiving notice of the transferor’s claim to restitution of the benefit or its value.
* Wadham College, University of Oxford; Senior Fellow (Law), University of Western Australia. I am grateful to Professor Michael Bryan, Professor Andrew Burrows, Mr Robert Stevens and the anonymous referee for their comments on earlier drafts of this paper.
1. R Goff and GH Jones, The Law of Restitution
, 1st edn (London, 1966), 492–496.
2. Lipkin Gorman (a firm) v. Karpnale Ltd
[1991] 2 AC 548 (HL), 578.
3. W Swadling, “The Nature of Ministerial Receipt”, ch 9 of P Birks (ed), Laundering and Tracing
(Oxford, 1995); P Birks, “Overview: Tracing, Claiming and Defences”, ch 11 of P Birks (ed), Laundering and Tracing
(Oxford, 1995); M Bryan, “Recovering Misdirected Money from Banks: Ministerial Receipt at Law and in Equity”, ch 10 of F D Rose (ed), Restitution and Banking Law
(Oxford, 1998); P Birks, “The Burden on the Bank”, ch 11 of F D Rose (ed), Restitution and Banking Law
(Oxford, 1998); J Moore, Restitution from Banks
(D Phil thesis, University of Oxford 2000), summarized and adopted by C Mitchell, “Assistance”, ch 6 of P Birks and A Pretto (eds), Breach of Trust
(Oxford, 2002), 184–187; R Stevens, “Why do agents ‘drop out’?” [2005] LMCLQ 101.
4. Lipkin Gorman
v. Karpnale
[1991] 2 AC 548, 578.
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